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Tracking Your Paycheck Protection Program Loan Proceeds

Accounting and finance managers in businesses that have received their proceeds from the Paycheck Protection Program are directing their attention to complying with the requirements in terms of how they use the money. There is no specific requirement on how funds should be tracked, as of yet. As a result, companies currently should choose from three options:

  1. Set up a new bank account specific for Paycheck Protection Program funds. (Some banks are not opening new accounts at this time.)
  2. Create a general ledger cash account that is specific to the Paycheck Protection Program funds and utilization.
  3. Manually track Paycheck Protection Program fund utilization using a spreadsheet (such as Microsoft Excel).

New Bank Account. You can pay allowed expenses directly from the new account, or use it to fund other operating accounts set up for automatic withdrawals or other payments. Without guidance indicating otherwise, we do not suggest that you change those automatic withdrawals or payments to be made from the new account, since the account is intended only for the short-term management of the PPP funds.

While the account will help you track how much of funds are used, it is also important to track how funds are used. This may be difficult when using the new bank account alone, given the limited level of detail that can accompany the transactions. Consider employing a general ledger account or manual spreadsheet in conjunction with the bank account.

General Ledger Account. If you choose to create a general ledger cash account, do so by creating a new PPP-specific cash account or subaccount, whichever works best based on your accounting system. Use the cash in this account to either directly pay the qualifying disbursements or fund your primary cash account to make the disbursements. This is similar to using a new bank account, except your accounting software likely allows you to enter more transaction detail.

The benefit of a general ledger account is that it maintains all documentation in your accounting system and reduces the possibility of manual errors. In addition, you can use your accounting system’s reporting functions. The downside is that additional guidance could change the way you use your funds, and these changes may be difficult to incorporate into your accounting system. For example, you may need to reverse transactions instead of deleting them. As well, your bank reconciliations could be more complicated until your PPP funds are depleted.

Manual Spreadsheet. To track fund utilization using a spreadsheet, enter your loan proceeds balance and subtract each qualifying disbursement. Be sure to include details about the disbursements in the spreadsheet, so that you are tracking both how and how much of the funds are being used.

The benefit of using a spreadsheet is that, as more guidance is provided, you can make adjustments easily, adding or deleting expenses. There is also no limit of the amount of information you can include in a spreadsheet, allowing you to keep as much detail as you want regarding the expenses. You can also use a formula to track how much of your fund utilization is for payroll and how much to cover non-payroll costs. The downside of this method is that it is manual, which is time-consuming and potentially inefficient, subject to human error, and does not integrate with your accounting system which leaves you with limited reporting functionality.

Other Record-keeping for Forgiveness. In addition to tracking, loan recipients seeking forgiveness must have documentation proving loan funds are used as specified by the law. Section 1106 of the CARES Act states that loan recipients seeking forgiveness must submit documentation including:

  • Verification of full-time equivalent employees on payroll and pay rates
  • Payroll tax filings reported to the IRS
  • State income, payroll, and unemployment insurance filings
  • Cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments for covered mortgage obligations, lease obligations, and utilities
  • Any other documentation the Administration determines necessary. Additional guidance on PPP loan forgiveness could require additional documentation.

If you have questions regarding your PPP loan or use of those funds, please contact your HBK advisor.

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About the Author(s)

Nicholas R. Odille is a Principal in the Youngstown, Ohio office of HBK CPAs & Consultants. He began his public accounting career in 2004 at HBK. Nick has experience working with closely-held companies and their owners. He provides tax and assurance services to clients involved in the cannabis, transportation, and construction industries.

Amy Reynallt is a Manager with the HBK Manufacturing Solutions Group in the Youngstown, Ohio office of HBK CPAs & Consultants. She is experienced in navigating the strategic and financial matters associated with manufacturing and works closely with manufacturers to help them plan, execute, and meet their short- and long-term financial goals.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.